PandoDaily » Francisco Daohttp://pando.com
speaking truth to the new powerTue, 31 Mar 2015 22:00:37 +0000enhourly1http://wordpress.com/http://1.gravatar.com/blavatar/f62ca55a2bb411ae79d3b46aa43f9dc2?s=96&d=http%3A%2F%2Fs2.wp.com%2Fi%2Fbuttonw-com.png » Francisco Daohttp://pando.com
Creating the perfect world is trickier than you thinkhttp://pando.com/2013/11/07/creating-the-perfect-world-is-trickier-than-you-think/
http://pando.com/2013/11/07/creating-the-perfect-world-is-trickier-than-you-think/#commentsThu, 07 Nov 2013 16:00:51 +0000http://pandodaily.com/?p=113688“Ruby Sparks,” a novelist played by Paul Dano falls in love with a character he’s written, whom he believes is the ideal woman. Eventually, she comes to life and they have a relationship. But despite the fact that he created her based on his image of the perfect girl, and can even alter her personality through his writing, he finds dating…]]>

In the movie “Ruby Sparks,” a novelist played by Paul Dano falls in love with a character he’s written, whom he believes is the ideal woman. Eventually, she comes to life and they have a relationship. But despite the fact that he created her based on his image of the perfect girl, and can even alter her personality through his writing, he finds dating the real life Ruby to be much more complicated than he imagined.

The underlying message of the movie is that the novelist in the film created a shallow facsimile of a woman, because he didn’t understand them enough to write one who is complete and complex.

It occurred to me that many Silicon Valley entrepreneurs view the world with the same overly simplistic short sightedness with which the novelist viewed women. Just as Dano’s character figured he could write a cute, fun loving girl and that represented perfection, too many tech entrepreneurs think they can create utopia with apps and crowdsourcing. This oversimplified worldview is why Valley entrepreneurs who haven’t done much more than mail something in a box or figured out another way to share pictures, think they can come up with easy solutions for everything. Creating a perfect world is far trickier than most of them think.

To give you an idea of how little of the world Internet entrepreneurs create, consider this. I am writing this while sitting on a couch, with my feet on a table, and typing on a computer. You are reading this post on some kind of physical device, probably sitting in a chair, in a place that you likely drove to in a car. If you walked, you did so over concrete sidewalks through a city filled with buildings. What does any of this have to do with the Internet? Nothing, and that’s my point. The world is still made of physical assets and aside from serving an IT function, the internet doesn’t produce any of it. For entrepreneurs who work almost exclusively in a virtual space to think they have the answers to everything is the epitome of hubris.

In addition to the oversimplified views often expressed by the tech industry, Internet entrepreneurs rarely consider the ramifications or even the possibility of unintended consequences. Problems are viewed as “one and done” fixes and anything that gets broken in the process is chalked up to necessary collateral damage. But this isn’t really solving problems as much as trading one problem for another. Take for example online shopping. Ecommerce is great. It solves lots of problems. But its proponents conveniently ignore the fact that it has also put thousands of brick and mortar employees out of work. If you had to look at the whole picture, not just the Silicon Valley side of it, it’s no guarantee that online shopping is a net positive.

The film provides a great example of this when the novelist changes Ruby’s personality through his writing but still can’t “fix” her as his changes result in different issues. Because he still sees her in simplistic terms, his fixes don’t address the holistic situation. Unlike the Valley, Dano’s character can’t ignore the unintended consequences of his solutions and he ultimately discovers that, despite having godlike powers over his creation, he is unable to create the perfect woman. His ideas of perfection prove to be elementary and the real person ultimately turns out to be far more complicated.

If you’re only trying to make a few bucks, score an exit, or create a solution to a singular problem and you harbor no delusions about possessing the superiority to fix everything, please understand this is not directed at you. But for those in the tech industry who feel they’re qualified to play armchair quarterback and prescribe what’s best for our society and our future, you would be well served to develop a greater understanding of complexity and unintended consequences.

Just as the novelist was unable to create the perfect woman because his understanding of women was shallow and incomplete, Silicon Valley entrepreneurs who reduce the world to simple solutions have little hope of solving the complex problems that plague our society as a whole.

Francisco Dao

Francisco Dao is the founder of 50Kings, a private community for technology and media innovators. He is a former leadership columnist for Inc.com, a lifelong entrepreneur, author, and former stand-up comic. He writes every Tuesday and Thursday for PandoDaily.

]]>http://pando.com/2013/11/07/creating-the-perfect-world-is-trickier-than-you-think/feed/2ruby_sparksfrandaoruby_sparksLife turns on just a few momentshttp://pando.com/2013/11/05/life-turns-on-just-a-few-moments/
http://pando.com/2013/11/05/life-turns-on-just-a-few-moments/#commentsTue, 05 Nov 2013 18:00:48 +0000http://pandodaily.com/?p=113221]]>

Have you ever wondered how your life turned out the way it did? Or if you’re young and just starting out, what will determine your future? Most people think the course of their lives are wholly born from the fruits of their own hands, but the truth is that life is mostly determined by just a few moments that are often decided by someone else.

I’m not suggesting we have no input, and it’s a complete lottery. Clearly our personal choices have an impact, and our efforts play a role in guiding us toward success or failure. But regardless of our endeavors, the ultimate outcome is never actually within our control.

Some childhood friends of mine recently celebrated their 16th wedding anniversary and “Jenny,” the wife, posted their old prom pictures to show how far they’ve come. As I browsed through the memories, I thought about how they got to where they are. “Danny” and Jenny were high school sweethearts, broke up in college, dated other people, got back together, argued regularly, worked it out, got married, and 24 years later, including 16 as husband and wife, they have two daughters and have built a life together.

But what if they had never gotten back together? What if either of them had met someone they really liked while they were on a break. Everything about both of their lives would be radically different. They might still be single, or divorced from other people, and their daughters would never have been born. The entirety of their lives as they know it would not exist if Jenny had turned down Danny for the prom, or one of them had been too proud to pick up the phone after a fight, or take the other one back some 20+ years ago. Each one’s fate was determined by the choices of the other.

But business is different, right? People are successful purely because of their own smarts and skills. You alone determine whether you win or lose. Tell that to Noah Glass, the forced out co-founder of Twitter. According to Nick Bilton’s book “Hatching Twitter,” Glass was instrumental in the creation of the service and even came up with the name. Yet he was ousted with little to show for it. Adding insult to injury, Glass’ contributions have been all but erased from the company history. When Twitter goes public later this week, Glass will see only a tiny token amount of the windfall that will come to Evan Williams and Jack Dorsey.

If you think stories such as Noah Glass’ in which a person’s success is determined by a single decision made by someone else are rare, then you are truly naive. Just in my close circle of friends, one person had a multi-million dollar term sheet rescinded last year after his co-founders decided the startup life wasn’t for them and quit. Today, he’s selling his car to pay off debts from his startup. When his co-founders decided to give up, the course of his life was dramatically altered by a decision made by someone else and there was nothing he could do.

Success and failure, even our personal happiness, are largely determined by the following turning points, neither of which are ours to decide.

1. Who, or if, you marry. Think about this. The difference between marrying the girl or guy of your dreams and them cheating on you and breaking up can come down to a few shots of tequila. A single night of drunken indiscretion can determine whether you build a life and family together like Danny and Jenny, or you end up alone or married to someone else.

2. One lucky career break. Will you be Noah Glass or Jack Dorsey? Both were key to the founding of Twitter, but today, one is a superstar who will make hundreds of millions of dollars with the IPO, while the other is largely forgotten. And all of it came down to a single decision of who to let go made by Evan Williams.

The idea that everything we have become, or might become, is largely reliant on two decisions over which we have little control is a frightening thought that most people don’t want to accept. It’s easier to think that we alone determine the course of our lives. We can take action to increase our chances of success of course. I’m a firm believer in putting yourself in the game and creating your own opportunities. But more often than not, your life will turn on just a few moments that are ultimately decided by someone else.

Francisco Dao

Francisco Dao is the founder of 50Kings, a private community for technology and media innovators. He is a former leadership columnist for Inc.com, a lifelong entrepreneur, author, and former stand-up comic. He writes every Tuesday and Thursday for PandoDaily.

I have a good friend who, in an attempt to look productive and important, is constantly tweeting and posting about how hard he’s hustling. Not only are his boasts painfully transparent, but sadly, his ideas about what makes someone effective are usually just plain wrong. For example, a few days ago he posted a motivational video with the following quotes:

“If you’re going to be successful, you gotta be willing to give up sleep…” and “…you gotta want to be successful so bad you forgot to eat” — that’s for real.

This is flat out ridiculous. How can someone possibly perform at their best if they’re not sleeping and forgetting to eat? If you’re the CEO or a manager at your company, do you want your employees coming into work exhausted and starving? Do you think anyone can do quality work while they’re in such a condition? Of course not. And yet my friend is not alone in buying into the “crushed and crushing it” mentality of work.

Amongst entrepreneurs it’s become a badge of honor to talk about how many hours they’re working, how inbox zero is a fantasy because they’re too slammed, how “you can sleep when you’re dead,” and various other claims about “hustling 24/7.” When you cut through the bluster, what these people are really saying is, “I don’t know how to work efficiently and effectively, and I’m also not taking care of myself.” Pro-tip: poor work and health habits are not something you want to be bragging about.

On a serious note, I’d like to introduce the idea of “flow” and help put an end to the belief that working yourself past the point of exhaustion is somehow the best way to get things done. I’m sure you’ve heard the term before, probably while watching sports, but most people don’t think much about it and definitely don’t adopt it in their own work habits.

Where generic hustle is often frenetic for no reason, and always exhausting and unsustainable, flow is a more natural state of elevated activity. For example, in basketball, desperate teams will sometimes implement a full court defense during crunch time, diving for loose balls and running furiously after passes. Occasionally, this kind of hustle turns the tide of the game but teams can never keep up the pace for more than quarter.

In contrast, flow is what you see when a well coached team performs as a cohesive unit with a steady rotation of properly rested players. Michael Jordan, the greatest player of all time, was known to manage his playing time and rest accordingly so he could be at his peak in the closing minutes of the game. He didn’t play to exhaustion and he certainly didn’t show up to the arena sleep deprived and hungry.

Part of the reason we get seduced by hustle is, in the absence of actual flow, activity feels good. It feels right. It feels like we’re doing something, regardless of how poor our actual productivity might be. Furthermore, very few of us have had the luxury of learning our own state of flow. Everything we’ve done has been based on someone else’s demands. We followed our school’s demands, our parents’ demands, our boss’s demands. We never learned to work according to our own needs.

Flow is different for every person and entails both physical and mental pacing. It doesn’t necessarily have to feel like a drug induced high, but finding your personal rhythm and state of flow will allow you to work more effectively instead of just harder. When in the proper state, thinking and decision making should come easy, and your work should feel effortless. You might find yourself staying up late because you’re more comfortable working at night, but you’re not giving up sleep just to show the world how much of a hustler you are. Claiming the raw number of hours you put in, or the amount of sleep you missed, as an indication of how serious you are just makes you look like an amateur.

If you really want to get things done, forget about the crushing hours and relentless hustle. Figure out how to work in flow, and you’ll likely produce better results in less time while taking better care of your health in the long run. Isn’t that a much better way to work?

Francisco Dao

Francisco Dao is the founder of 50Kings, a private community for technology and media innovators. He is a former leadership columnist for Inc.com, a lifelong entrepreneur, author, and former stand-up comic. He writes every Tuesday and Thursday for PandoDaily.

]]>http://pando.com/2013/10/31/hustle-and-flow/feed/17tired_horsefrandaotired_horseIs it better to be motivated by money or ego?http://pando.com/2013/10/29/is-it-better-to-be-motivated-by-money-or-ego/
http://pando.com/2013/10/29/is-it-better-to-be-motivated-by-money-or-ego/#commentsTue, 29 Oct 2013 21:00:40 +0000http://pandodaily.com/?p=112354Micah explained there are essentially two types of bloggers, those motivated by money and those motivated by ego. As he made his argument about the different incentives and behaviors of each group, I started thinking about how entrepreneurs also fit into these same motivational categories. Money or ego? Which one was the more effective driver? Which one produced better…]]>

Over dinner last week, my friend Micah explained there are essentially two types of bloggers, those motivated by money and those motivated by ego. As he made his argument about the different incentives and behaviors of each group, I started thinking about how entrepreneurs also fit into these same motivational categories.

Money or ego? Which one was the more effective driver? Which one produced better results? Obviously the two are not mutually exclusive, we all need money and we all have egos, but most people are generally inclined toward one direction or the other. Which way do you lean?

Which is more likely to build a successful business?

In terms of building a sustainable, profit generating enterprise, I think it’s obvious the money driven entrepreneur is more likely to be successful. All businesses ultimately boil down to math and those who are profit motivated typically have far more respect for the bottom line than those who are propelled by other reasons.

Which is more likely to build a better product?

The standard argument of economic incentive suggests that the money-driven entrepreneur would build a better product in order to sell more units and maximize profit. But I believe the purely financial incentive model is incomplete and overly focused on short term returns. Since money is less important to him, an ego driven entrepreneur is more likely to take personal pride in his product and view it as a direct reflection on himself. Therefore, he would be less inclined to cut corners in order to squeeze out a few extra dollars of margin. Finally, where a money driven entrepreneur is prone to harvesting profits, an entrepreneur motivated by his ego is more likely to accept losses if it means producing a better product. Advantage goes to those driven by ego.

Which is more tenacious?

Most people would point to ego driven entrepreneurs such as Steve Jobs and Elon Musk as proof that they are more tenacious than those motivated by money, but I believe people like Jobs and Musk are the exception and not the rule. Generally speaking, profit propelled entrepreneurs are more focused on success than those fueled by ego who tend to have more fallback options. I believe the edge belongs to the money motivated.

Which should you invest in?

This depends on who you are. If you’re a bank and your profits are based on steady interest payments from borrowers unlikely to default, then a profit driven entrepreneur is clearly the better bet. If you’re a VC and you’re looking for someone to hit one out of the ballpark and give you a 10x return, then an ego driven entrepreneur is the one you want. Without in-depth analysis of returns on business loans versus venture capital, it’s difficult to say which one is the better overall bet. Let’s call it a draw based on the investor’s tolerance for risk.

Which is more likely to motivate one to leave a mark on the world?

You might be familiar with the George Bernard Shaw quote, “The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.”

For an entrepreneur, focusing on profit is the reasonable thing to do. Without it, he probably wouldn’t last very long. By extension, an entrepreneur motivated by ego first is therefore less than reasonable and quite often has unreasonable priorities. Extrapolating from Shaw’s maxim, an unreasonable ego driven entrepreneur is far more likely to leave his mark on the world than a reasonable one motivated by money.

Which rules Silicon Valley?

When I started this post, I figured the majority of tech entrepreneurs were ego driven based on their typically unprofitable business models. But as I thought about why most people start companies and why so few ever do anything that leaves a lasting mark, I realized I was looking at it the wrong way. In order to understand Silicon Valley, we need to understand that the companies themselves are the primary product for sale and most entrepreneurs these days are trying to sell out as fast as possible. Silicon Valley is in fact money motivated.

I don’t know if we’ve settled the question of which type of entrepreneur is better. I suppose it depends on what you value and what your definition of “better” is. Both motivations have their advantages and disadvantages. Do you know which one motivates you?

Francisco Dao

Francisco Dao is the founder of 50Kings, a private community for technology and media innovators. He is a former leadership columnist for Inc.com, a lifelong entrepreneur, author, and former stand-up comic. He writes every Tuesday and Thursday for PandoDaily.

]]>http://pando.com/2013/10/29/is-it-better-to-be-motivated-by-money-or-ego/feed/11two_devilsfrandaotwo_devilsEntrepreneurship has become as commoditized as collegehttp://pando.com/2013/10/24/entrepreneurship-has-become-as-commoditized-as-college/
http://pando.com/2013/10/24/entrepreneurship-has-become-as-commoditized-as-college/#commentsThu, 24 Oct 2013 22:00:52 +0000http://pandodaily.com/?p=111793]]>

As most of you know, the tech industry has made a sport out of bashing college. One of the core criticisms of higher education is that college degrees have become ubiquitous and commoditized. The argument posits that so many institutions of suspect quality are handing out degrees like candy that college has lost its value as a reliable credential and is therefore no longer worth pursuing. Having graduated with a useless degree from Cal State Northridge, I generally agree with this argument when applied to middle of the road schools.

But the problem of commoditization is not limited to college degrees. In fact, the core group of people at the forefront of the critical attacks on college, startup entrepreneurs, are suffering through the same process of being commoditized themselves. Let’s consider some of the factors affecting both college grads and startup founders.

1. Ubiquity – There was a time when both college and entrepreneurship were rare and that scarcity made them special. If you had a college degree in 1950, you were almost guaranteed to be on the fast track. Over the past 70 years, the number of college graduates exploded and significantly drove down the value of the degree. If you look at internet entrepreneurship, the same thing has happened and at a much faster pace. Fifteen years ago you had Idealab and that was about it. Now incubators are sprouting up faster than we can keep track of them and turning out entrepreneurs by the thousands. Both groups have become overpopulated and in the process both have lost their luster.

2. Lack of focus and intention – One of the developments that caused college to become devalued was when it became something people did “just because.” I clearly remember the high school conversations of, “it doesn’t matter what you study, as long as you go to college.” In hindsight, this was terrible advice. The same “just because” reasoning has now infected internet entrepreneurship. Y-Combinator effectively declared the “it doesn’t matter what you start” argument as valid when they began accepting teams without ideas. The focus and intention that were once so important for entrepreneurs are no longer required. They’re just like students who wander into college without picking a major.

3. Interchangeability – Most college grads are interchangeable. An accounting grad from San Jose State can easily be replaced with an accounting grad from USF and vice versa. This common interchangeability is a large part of what has devalued the college degree. These days in the startup space, you see the same kind of interchangeability. Go to an incubator and look around. I’ll bet you’d be hard pressed to say why one team is better, or even different, than any other. Any group of guys in their mid-twenties who know how to code is virtually indistinguishable from another group of founders. Just like your average college graduate, founders can be swapped out like Lego blocks.

4. Declining legitimacy – College lost its value when many employers stopped believing in the legitimacy of its credential. For now, investors, who essentially employ entrepreneurs, are still “hiring” them. But we are already seeing a dichotomy between top tier incubators and everyone else. A Y-Combinator or Techstars graduate is far more likely to receive additional funding than a graduate from a no-name incubator. This mirrors the dichotomy between Ivy League graduates, who are still in high demand, and people who graduate from average schools. Just as most colleges below the top tier have seen a decline in their ability to produce positive outcomes for their graduates, we are seeing a similar decline in legitimacy for second and third tier incubators and accelerators.

It’s easy to see the forces of change affecting other people but we rarely recognize it when it’s happening to us. I wonder how many internet entrepreneurs realize the factors that have made college a debatable endeavor are now commoditizing internet entrepreneurship at an even faster rate. Entrepreneurs aren’t going away, of course. People will always start new businesses. But just as college grads largely lost the favored place in society they once held, startup founders may soon find themselves similarly commoditized. The once fabled internet entrepreneur is starting to look a lot like the common college graduate with an art history degree from State U.

[Image via Thinkstock]

Francisco Dao

Francisco Dao is the founder of 50Kings, a private community for technology and media innovators. He is a former leadership columnist for Inc.com, a lifelong entrepreneur, author, and former stand-up comic. He writes every Tuesday and Thursday for PandoDaily.

Nine years ago, after starting several businesses that had left me dissatisfied, I decided I would stop focusing on money and only pursue things that were interesting to me. At the time, I just wanted to do something fun. But what I didn’t realize back then was that I was actually switching my personal operating system from one based on money to one based on character, and the change would be far more profound than I could have ever imagined.

Virtually everybody runs on a money- and hype-driven OS. For everyone using this standard — and it really is almost everyone — fame and fortune are the only measurements that matter. The quality of someone’s character is irrelevant as long as they have wealth or notoriety. But if your operating system is based on character, these “normal” standards have no bearing. Like someone using a Mac in a world full of Windows, the rules and constraints of Windows, or in this case the money OS, simply don’t pertain to you. The end result is both liberating and empowering.

In the process of rejecting wealth as the primary standard of measuring a person’s worth, one is also released from having that same standard applied to them. People using the money driven OS might try to judge you strictly by your net worth, but it’s no longer applicable. It’s like someone judging you for having a bad jump shot during a math competition. It doesn’t matter.

I didn’t realize how much being free from this judgment contributed to my self confidence, until one day an acquaintance asked me where I had made my money. I’ve never claimed to be rich, so I was a bit puzzled why she would assume that I was. I replied, “Money? I don’t have any money.” She said, “You carry yourself like you do.”

In letting go of the money-based OS, I had subconsciously begun to measure myself on the character standard. Based on character, I never felt inferior, because I was confident I stacked up favorably. What this person was interpreting as the self assurance of someone with a lot of money, was actually the self assurance of someone for whom the money standard wasn’t being applied at all.

Paradoxically, adopting a character-based operating system has actually opened doors to people who are financially successful. As people gain wealth, money often gets in the way of building genuine friendships. It becomes easy for suspicion to creep in. Many wealthy people end up associating exclusively with people of similar economic status, which sounds okay until you realize this means entire segments of the population, including many interesting people, are effectively closed to them. It is truly a gilded cage.

For financially successful people, the character of those around them takes on a new level of importance. It’s no longer just about being around good people, but about needing to be around people whom they can trust. Unless you’re already on a similar economic level, a person using the money OS will always carry with them the taint of suspicion.

When I decided to put character first, I had no idea that rejecting money as my primary standard of measurement would result in a plethora of friendships with people who were financially successful, but that’s exactly what happened. Money stopped being “a thing” and we could relate as equals on the basis of character.

I’m not so naive as to suggest money is completely irrelevant. We all have bills to pay, and there is a base level of financial need. But it should not be the only, or even the dominant, measurement of a person’s worth — not for others and definitely not for yourself.

Letting go of the money-based operating system in favor of one based on character means being liberated from the common judgments of others. It means you can measure your self worth and your happiness by something other than your outward success. And it means associating with people based on who they are as a person and not the size of their wallet or the reach of their fame.

Francisco Dao

Francisco Dao is the founder of 50Kings, a private community for technology and media innovators. He is a former leadership columnist for Inc.com, a lifelong entrepreneur, author, and former stand-up comic. He writes every Tuesday and Thursday for PandoDaily.

]]>http://pando.com/2013/10/22/operating-on-a-character-driven-os/feed/3money_donkeyfrandaomoney_donkeyBy definition, Silicon Valley has few legitimate entrepreneurshttp://pando.com/2013/10/17/by-definition-silicon-valley-has-few-legitimate-entrepreneurs/
http://pando.com/2013/10/17/by-definition-silicon-valley-has-few-legitimate-entrepreneurs/#commentsThu, 17 Oct 2013 20:00:02 +0000http://pandodaily.com/?p=110925excerpt of Nick Bilton’s upcoming book about Twitter, there’s a line where he mentions how it’s an oddity that startup founders refer to themselves as “entrepreneurs,” since many of them “have no understanding of how to run a business or turn a profit.” I thought this was an interesting point and started wondering if…]]>

In the New York Times excerpt of Nick Bilton’s upcoming book about Twitter, there’s a line where he mentions how it’s an oddity that startup founders refer to themselves as “entrepreneurs,” since many of them “have no understanding of how to run a business or turn a profit.”

I thought this was an interesting point and started wondering if Bilton was applying an unreasonable definition of the word. What qualifications must be met before someone can accurately be defined as an entrepreneur? Are tech founders really just kidding themselves?

Google defines “entrepreneur” as a person who organizes and operates a business or businesses, taking on greater than normal financial risks in order to do so.

Consider the first part of that definition, “a person who organizes and operates a business.” I would argue that, properly defined, a business should be at least occasionally profitable. At a bare minimum, it should have a viable path to profitability. Most tech startups never make a penny of actual profit and in many cases have no idea how they’ll even bring in top line revenue.

Since the organizations that most Silicon Valley founders launch cannot honestly be considered legitimate businesses designed to generate profits within a reasonable time frame, those founders therefore do not fit the definition of entrepreneur as someone who organizes or operates a business.

The second part of the definition states that entrepreneurs “(take) on greater than normal financial risks.” I suppose startup founders are taking on more risk than someone who stays in a cushy corporate gig but they are hardly engaging in a level of risk that anyone would consider extraordinary.

Let’s compare the risks incurred by a run of the mill brick and mortar entrepreneur to those of a Silicon Valley startup founder. Subway is the most popular franchise in the country so we’ll use that as our baseline. The median capital requirement needed to open a Subway franchise is $188,475 which almost always comes from personal savings or a loan guaranteed by the entrepreneur such as a second mortgage on their home.

Assuming the Silicon Valley startup founder isn’t a complete moron, he can join an accelerator and immediately receive somewhere around $50,000. So in terms of financial risk, the average Subway franchisee is in the hole for $238,475 more than the average Internet startup founder. I think it’s pretty clear who’s taking on the exceptional risk. In fact, given that the Silicon Valley startup founders are actually receiving money, it’s hard to say they’re taking any risk at all.

You’re probably thinking, “But the Silicon Valley founders had to quit their jobs and $50,000 doesn’t go very far.” Sure, but the Subway franchisee had to quit his job too, and he has to stand behind a counter and make sandwiches all day. Both people have to sacrifice their time and forego their normal employment income. Quitting one’s job hardly qualifies as an extraordinary risk. Furthermore, if the tech founders get funded, an impossibility for the Subway franchisee, then all of their risk is removed.

When compared to average brick and mortar entrepreneurs, we see that Silicon Valley founders fail to meet the definition of an entrepreneur as someone who takes on greater than normal risk.

When we apply the proper definition of entrepreneur to what tech founders really do, it’s clear that there are very few actual entrepreneurs in Silicon Valley. In light of this, Internet startup founders might want to consider referring to themselves by more accurate descriptions such as “experimenter in online user engagement,” “creator of unsustainable organizations” or perhaps most fitting, “spender of venture capital money.” Because if all they’ve ever done is lose money, then they’re certainly not running a business.

And if they haven’t put some serious skin in the game, then they haven’t incurred exceptional risk, both of which are necessary to fit the true definition of an entrepreneur.

Francisco Dao

Francisco Dao is the founder of 50Kings, a private community for technology and media innovators. He is a former leadership columnist for Inc.com, a lifelong entrepreneur, author, and former stand-up comic. He writes every Tuesday and Thursday for PandoDaily.

People often point out the “anything is possible” spirit of Silicon Valley, but there’s a downside to the constant talk. For those still searching for their true calling, or even just an opportunity that resonates with them, the entrepreneurial buzz is both distracting and surprisingly narrow.

I saw this firsthand when my intern recently asked me, “How does a person find their professional path? Silicon Valley is a very confusing place to do that I’ve come to notice. I’m realizing how much more confusing Silicon Valley makes it with all the ‘do what you love’ …and incredible speed at which everything goes.”

It was always pretty obvious that most of the “follow your passion” talk was just entrepreneurs telling themselves a good story to get them through the tough times. But as I explained it to my intern, it became clear how this constant chatter was confusing for people in search of their path.

I told her, “You know it’s not true, right? Have you ever noticed how everyone’s passion is always an Internet startup? Do you really believe that all these entrepreneurs and wantrapreneurs are conveniently and coincidentally passionate about iPhone apps and relatively useless websites? Most of them are just doing what they think is the best path to success and claiming it as their passion.”

I’m not faulting people for trying to convince themselves that they’re following their dreams. Being an entrepreneur is hard, and I’m sure the self-talk helps keep a lot of them pushing forward. But for someone still searching for their passion, it presents a misleading picture. If all you hear is, “my passion is my Internet startup,” pretty quickly you start thinking your passion and the internet must somehow be connected. If it isn’t, and for most people it’s not, this is a recipe for confusion.

The idea that the Internet is the only viable option is not limited to 23-year old interns. A couple of years ago, a friend of mine who works in the tech industry, but not in a technical capacity, started telling me about an Internet idea she had. I could immediately tell she wasn’t in love with the idea, but was just looking to start her own business.

When I asked her why she was only thinking about Internet companies, she couldn’t answer. I told her, “Not everything has to be online. There are still a million things you can do in the real world.” Her eyes lit up with the realization that the world was not limited to .com, and she said, “I never even thought about it. You spend so much time around tech that you start to think that’s all there is.”

Even I’m affected by the constant stories of startup success. I run a great business that primarily consists of me going on vacation with amazing people, and yet I often find myself feeling a tinge of envy after reading about some 3-year old startup worth $100 million dollars. Sometimes, I even start trying to come up with Internet ideas of my own despite having no technical skills and no particular passion for this type of business.

This is the danger of immersing yourself in the technology ecosystem. There is always a steady stream of temptation drawing you into a very narrow way of thinking. The message is essentially “Internet or bust.”

Contrary to the standard message, the Silicon Valley dream is not about doing what’s possible, it’s about doing what’s possible on the Internet, or in many cases, doing what’s most likely to get funded or acquired. And all the talk about following your passion? That only applies if your passion is online. For people who have interests elsewhere or can’t reasonably convince themselves that their passion lies in Internet startups, this message can be downright disorienting.

Figuring out what you want to do with your life is hard enough. If you’re not naturally inclined to building an online business, don’t let the narrow dreams of the tech ecosystem limit your thinking. There’s still a very big world out there.

Francisco Dao

Francisco Dao is the founder of 50Kings, a private community for technology and media innovators. He is a former leadership columnist for Inc.com, a lifelong entrepreneur, author, and former stand-up comic. He writes every Tuesday and Thursday for PandoDaily.

]]>http://pando.com/2013/10/15/how-silicon-valley-limits-your-thinking/feed/11the_box_pdfrandaothe_box_pdIs tech really the right bet for Anytown USA?http://pando.com/2013/10/10/is-tech-really-the-right-bet-for-anytown-usa/
http://pando.com/2013/10/10/is-tech-really-the-right-bet-for-anytown-usa/#commentsThu, 10 Oct 2013 14:00:52 +0000http://pandodaily.com/?p=109817dozen other Silicon named areas just in the United States. Overseas we have Silicon Glen, Silicon Fen, Silicon Wadi, Silicon Welly,…]]>

These days just about every place is trying to create its own Silicon Valley. Everyone is so completely sold on technology as the savior of the economy, we now have Silicon Canal, Silicon Slopes, Silicon Sandbar, four Silicon Beaches, three Silicon Prairies, and a dozen other Silicon named areas just in the United States. Overseas we have Silicon Glen, Silicon Fen, Silicon Wadi, Silicon Welly, and the list goes on.

But is this focus on tech really the smart move for local economies? Or are they chasing a mirage?

Imagine you’re the mayor of Anytown USA, a mid-sized city whose industrial manufacturing base has been in steady decline. Unemployment is above the national average and only 24 percent of the population has a bachelor’s degree or higher (for reference 50 percent of people in San Francisco have a degree). Would you be better off trying to attract a Google office or an ACDelco auto parts plant? Most of the people reading this probably think the Google office is a no-brainer, but I’m not so sure.

If you step away from the positive press of bringing Google to Anytown USA and really think about the impact it would have, most cities would, at least in the short to mid-term, be better off with the blue collar factory.

Consider the raw numbers of who benefits directly with a job. Obviously these are made up figures but they’re probably not unreasonable. Let’s say 15 percent of the population of your average American city meets Google’s hiring standards while 60 percent qualify for a job at ACDelco. Based on minimum qualifications, the “old economy” factory provides a possible employment opportunity to a much greater percentage of the population.

But factory jobs are crappy and Google pays better.

At the risk of offending factory workers, let’s say that’s true on both counts. But if you’re unemployed or working at Taco Bell, a factory job sounds pretty damn good and since 85 percent of the local population isn’t even qualified to work at the Google office, unless you’re one of the very few lucky ones, who cares what they pay.

The trickle down effect will help the community.

Sure, money spent in the community gets spread around but let’s look at some more hypothetical numbers. Let’s say Google’s plan is to bring on 70 white collar employees at an average annual salary of $140,000 and 70 support staff at an average annual salary of $45,000. ACDelco plans on hiring 40 white collar workers at an average of $100,000, 200 line workers at $45,000, and 70 support staff at $35,000. Not only would the ACDelco plant pay $2.5 million more per year in salaries, but equally important the money would be spread out more evenly across a wider swath of the population.

Again, this is a completely fabricated scenario but even if the imaginary ACDelco plant didn’t come out ahead in total payroll, the fact that it employs a higher total headcount and therefore spreads the wealth across a wider base should be a consideration when thinking about which option provides the greatest overall benefit to the city.

I’m aware of both the right and the left ideology on markets, but remember, the exercise is to imagine yourself as the mayor of this town. You have to face these people on the street and your job is to do what’s best for the community, or at least what gets you re-elected. Does wooing the fictional Google office in an effort to call your city the new Silicon Anytown still look like the best option?

Most cities make an effort to attract tech companies as a way to set cornerstones for a growing industry. On this count, the Google office wins hands down over the ACDelco factory. But very few cities have actually been able to grow a significant tech sector and none have come anywhere close to creating the next Silicon Valley. In most places, it’s a lot of branding and effort for a relatively small number of jobs. The bet on technology is one being placed for the future.

Lastly, I know the decisions are not necessarily either/or. A smart mayor would try to get both the Google office and the ACDelco factory. The purpose of this exercise is just to show that tech is not necessarily the economy saving job machine everyone thinks it is. It’s probably the right bet in the long term, but many of these cities are looking at a decade or more to establish a tech industry while they have unemployed people who need jobs now.

Francisco Dao

Francisco Dao is the founder of 50Kings, a private community for technology and media innovators. He is a former leadership columnist for Inc.com, a lifelong entrepreneur, author, and former stand-up comic. He writes every Tuesday and Thursday for PandoDaily.

]]>http://pando.com/2013/10/10/is-tech-really-the-right-bet-for-anytown-usa/feed/12google_trailer_HQfrandaogoogle_trailer_HQVCs, Sears, and the disappearing middle markethttp://pando.com/2013/10/08/vcs-sears-and-the-disappearing-middle-market/
http://pando.com/2013/10/08/vcs-sears-and-the-disappearing-middle-market/#commentsTue, 08 Oct 2013 20:31:49 +0000http://pandodaily.com/?p=109468Homebrew about trends in the venture capital industry. For reasons you’ve probably heard before — startups require less money, Angel List has opened the industry, etc. — he predicted the VC industry would shift from resembling a standard distribution curve with a large middle segment to…]]>

A few weeks ago, I was chatting with Satya Patel of Homebrew about trends in the venture capital industry.

For reasons you’ve probably heard before — startups require less money, Angel List has opened the industry, etc. — he predicted the VC industry would shift from resembling a standard distribution curve with a large middle segment to an inverse curve with an emphasis on the lower end. The industry would evolve into lots of early-stage firms competing with angels at the bottom, a thin mid-level, and some healthy big time players at the top.

When I considered the ramifications of this trend, and how most middle-tier firms have been responding to it, it occurred to me we’ve already seen this play out in the larger economy as a whole, and that VCs can learn a few things from the businesses that have come out on top as middle markets have declined.

Some of you might remember when Sears was the quintessential department store and a dominant force in retailing. Shopping there was part of the fabric of American life. Today, it’s a shell of its former self. Purchased by Kmart in 2004 in a merger of two languishing companies, Sears has been selling off assets amidst losses for years. Once the store of choice for the middle class, it has seen its customers depart for Walmart and Target at the low end, and Barneys, Saks, and specialty shops at the high end — much like Satya’s predictions about the future of venture capital, the middle market where Sears operated hollowed out.

While the root economic causes are different, VCs can learn a lot from the decline of Sears and the middle market. Success can be found at both ends of the new inverse distribution curve, but as Clayton Christensen taught us, when an industry is being disrupted, half measures of reaching out to the bottom or attempting to superficially rebrand as a prestige firm aren’t going to work for mid-tier funds any more than remodeling stores worked for Sears.

Currently, there’s a tendency to view the early stage arena as a bubble and a train wreck waiting to happen. While it’s true that hype has attracted a flood of neophyte investors, a large part of this critique comes from incumbent middle-tier players who think they can buck the changes coming to their industry. Again, this is the classic incumbent reaction. Entrenched players always dismiss the rising low end disruptors just as Sears dismissed Walmart. And we all know how that turned out.

Even with all of the noise and dumb money, investing in the low end can be very profitable. But contrary to the undisciplined approaches currently being applied at the angel and seed stage, it requires well considered methods and exceptional skill.

I know that sounds like I’m stating the obvious but there are a lot of people piling in with ill-conceived ideas. The difference between someone like John Frankel at ffVC, who has produced outsized double digit annual returns for 10 years, and someone throwing money at an Angel List syndicate is like the difference between running Walmart and selling at a flea market. Both play to the low end of the market but one is a precision operation that produces huge returns while the other is run like a hobby.

At the other end of the market are the big money prestige funds. Consider the signal value that comes from an a16z investment versus a lesser branded fund. Some of my investor friends have told me that some well known VCs and angels provide zero, and even negative, signal value. The benefits of taking money from a fund such as Sequoia or Accel should not be underestimated. Additionally, not many firms can make a $25 million seed investment like Benchmark. Mid-tier funds simply don’t have the deep pockets and can’t offer the intangible benefits of a high end player regardless of how much they talk about their positioning.

Obviously I haven’t covered the details of either strategy. The point of this post is to show that the VC industry is bifurcating in a similar manner as other markets with the middle being disrupted from the bottom, per Christensen’s theory, and the high end pursuing a business model based on prestige and service.

Both ends of the market can be successful but very specific strategies must be followed in each. Mid-tier funds that haven’t fully committed to a low end strategy and don’t have the prestige, power, or dollars to establish themselves as a high end firm will find it increasingly difficult to compete.

Much like Sears’ disappearing middle class customers, these firms are catering to a disappearing class of entrepreneur. Posturing and arguing against the viability of the disruptors won’t be enough to save them.

Francisco Dao

Francisco Dao is the founder of 50Kings, a private community for technology and media innovators. He is a former leadership columnist for Inc.com, a lifelong entrepreneur, author, and former stand-up comic. He writes every Tuesday and Thursday for PandoDaily.